Division A manufactures an aircraft engine component with unit variable product cost of $38 and market price of $50. Division A incurs shipping costs of $3 per unit for sales to outside parties only....

Division A manufactures an aircraft engine component with unit variable product cost of $38 and market price of $50. Division A incurs shipping costs of $3 per unit for sales to outside parties only. Division B uses this component in the manufacture of its own engine production activities. Top management allows negotiated transfer pricing.

1. Refer to the information above. If Division A is operating at full capacity, the maximum transfer price (the ceiling of the bargaining range) is

a. $38.

b. $50.

c. $44.

d. $47.

e. There is no bargaining range.

2. Refer to the information above. If Division A is operating at less than full capacity, the minimum transfer price (the floor of the bargaining range) is

a. $38.

b. $50.

c. $44.

d. $47.

e. There is no bargaining range.